Digital Retail News

Amazon reports record quarter

Amazon.com traditionally has only faced one obstacle in its quest to infiltrate every aspect of consumers’ lives: it often lost money.

For a straight year now, that’s no longer the case.

On Thursday Jeff Bezos’ digital commerce empire reported better-than-expected profits, sending its share price up some 12% during after hours trading. The company reported a $513m profit during the first three months of 2016, up dramatically from its $57m loss during the same stretch last year.

That makes it Amazon’s most profitable quarter ever and its fourth straight.

The company sold $29.1bn worth of goods and services, up 28% from a year ago. The company’s spending, including the billions it spends on shipping, rose by a similar amount.

Costs are a key factor for Amazon’s future. It is currently wrestling with building its own shipping service to compete with the likes of UPS. On a conference call Thursday with financial analysts, chief financial officer Brian Olsavsky said, “we’re actually going to go ahead and buy some trailers”. He then noted the company recently agreed to lease up to 20 Boeing 767 jets.

Amazon does not disclose how much money it makes from consumer gadgets, such as the Kindle reader or its Echo “smart speaker”. In a press release, Bezos is quoted as saying his firm sold twice as many Fire tablets as during the first quarter last year. Of Echo, he said it “too is off to an incredible start, and we can’t yet manage to keep it in stock despite all efforts”.

The company did however offer details on how much it brings in from something much more pedestrian, and profitable.

Sales for Amazon Web Services, which hosts websites, rose nearly 64% against the same period last year to $2.6 billion. The good news for Amazon here is that running a bunch of servers for others’ websites costs a lot less than shipping goods across the globe.

Olsavsky faced questions from one analyst Thursday about how the company can continue to grow some of its popular services, such as Prime, which offers expedited shipping and more streaming programming for an upfront $99 annual fee. The service may be a hit with university students and affluent, but may seem daunting for lower income families.

Olsavsky said the company is considering offering a monthly option that would entice more people to try Prime. “It is a hurdle for many people,” he said.

Of course profits could be a double-edged sword for Amazon. For years, Amazon avoided large tax bills as the company plowed so much money into its operation that it ran at a loss.Now, in theory, it will have to pay more taxes to governments for staying out of the red.